As mentioned in this blog on November, 10th, Brazil’s banking system is bracing itself for a wave of consolidation. The last announcement came yesterday as Banco do Brasil, the country’s top state-controlled bank announced it will spend US$2.3 billion to buy a 71.3 percent share in Banco Nossa Caixa SA, owned by the Sao Paulo state government.

Banco do Brasil will have US$217.2 billion in assets with the acquisition of Nossa Caixa, for which it will make 18 monthly payments of US$124.7 million starting in March. Earlier this month, Brazil’s second-largest private sector bank, Itau, bought rival Unibanco, creating a Latin American financial giant with total assets surpassing Banco do Brasil.

Cyrus Sanati has posted some interesting comments on the New York Times blog about this acquisition.

“If you look at the Brazilian banking system, there are 10 large banks representing 87.1 percent of the financial system,” Felipe Asenjo Wilkins, head of research for FIT Research in Santiago, Chile, told DealBook. “This is too much if we compare it with other emerging markets like Chile, Peru and Colombia.”

So who might be next? Banco do Brasil will probably move to purchase a stake in Banco Votorantim, a family-owned bank in São Paulo, Lia da Graça, an analyst with Banif Securities in São Paulo, told Dealbook. That purchase, along with another smaller bank, would put Banco do Brasil in the top spot.

All this could be unsettling to Brazil’s third-largest bank, Bradesco. It is not shy to do a deal to maintain its market share. “From 1948, Bradesco bought like 48 financial institutions” including banks, Mr. Wilkins said.

Fresh news from Reuters reveal that the Brazilian banks are in extremely good shape, thank you very much…

Brazil’s two largest private-sector banks reported strong third-quarter earnings on Monday and said they would continue to take advantage of the current market turmoil to snap up loan portfolios from smaller rivals in distress.

Banco Bradesco (BBDC4.SA: Quote, Profile, Research, Stock Buzz) and Banco Itau (ITAU4.SA: Quote, Profile, Research, Stock Buzz) sought to allay concerns that they might be vulnerable to the recent devaluation of the Brazilian real BRBY against the U.S. dollar by disclosing their exposure to foreign currency derivatives.

Both banks have benefited from surging demand for consumer loans in Brazil’s fast-growing economy at a time when the global credit crunch has pummeled financial firms from the United States to Europe.

Itau (ITU.N: Quote, Profile, Research, Stock Buzz) was not scheduled to report earnings until Nov. 4 but rushed out its results because of the turmoil in financial markets. It posted a quarterly profit of 1.8 billion reais ($775.9 million), up 14.6 percent from a year earlier.